Endogenous Distribution, Politics, and Growth

Satya P. Das and Chetan Chate
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Satya P. Das: Indian Statistical Institute - Delhi Centre
Chetan Chate: The Colorado College, Colorado Springs
Authors registered in the RePEc Author Service: Chetan Ghate

No 2001019, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper generalizes the analysis of distributive conflict, politics, and growth developed by Alesina-Rodrick (1994). We construct a heteregenous-agent framework in which both growth and the distribution of wealth are endogenous. Due to adjustments in the distribution of wealth, the composition of factor ownership across households equalizes in the long run. This implies that the optiomal tax rate is the same for all households and equals the growth maximizing tax rate. Hence, there is no distributive conflict in the long run. When the model is augmented with a non-political redistributive policy, the model predicts that long run growth exhibits a negative monotonic relationship with respect to this policy, i.e., a redistributive policy that leads to a more equitable wealth distribution unambiguously reduces growth in the long run.

Keywords: Median voter; Endogenous growth; Wealth distribution; Distribtuive conflict; Redistributive policy (search for similar items in EconPapers)
JEL-codes: D31 E62 O40 P16 (search for similar items in EconPapers)
Pages: 19
Date: 2001-07-01
New Economics Papers: this item is included in nep-dev
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Working Paper: Endogenous Distribution, Politics and Growth (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2001019

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